Posted July 18, 2014

What’s Next For Mortgage Rates? Only 40 Out Of 1,000 Consumers Guess Right.

Fannie Mae survey shows that U.S. consumers believe it

According to a Fannie Mae survey, 87% of U.S. consumers believe home prices will rise between now and 2015; with the average consumer believing values will rise 2.4 percent in the next year.

The survey is the latest in a series of signals which indicate a shift in consumer attitudes. With mortgage rates low and home prices rising, today's housing market may be the best that buyers see all year.

Some mortgage lenders now quote rates in the 3s.

Get a live mortgage rate quote now.

70% Of Consumers Say "It's A Good Time To Buy"

Each month, Fannie Mae conducts its National Housing Survey. To gather data, the agency speaks with 1,000 households, comprised of homeowners and renters, about the state of the U.S. housing market.

Survey results from Fannie Mae's June survey show U.S. consumers overwhelmingly bullish on the future of housing. 70% of those surveyed said now is "a good time to buy a home".

It's not tough to understand why. 

As compared to the start of last year, in many U.S. cities, home values are up more than 10 percentage points and the housing market's slow,steady recovery has been a national news story.

The hardest-hit cities of last decade's downturn have led this decade's rebound.

Phoenix, Arizona; San Francisco, California; and Los Angeles are three notable markets in which single-family home values have climbed by more than twenty percent annually. Condos in these markets are faring even better.

There is hardly an area of housing which isn't showing solid annual growth.

  • Existing home supply remains in bull market territory
  • New home sales continue to expand, even as prices are rising
  • Mortgage lenders, exhibiting confidence in housing, are expanding loan guidelines

Furthermore, with mortgage rates near 56-week lows, many U.S. lenders now quote rates in the 3s. When mortgage rates are low, home purchasing power is stretched.

Today's home buyers can afford 8% more home as compared to just 7 months ago.

Get today's mortgage rates.

Just 4% Expect Mortgage Rates To Drop

Current mortgage rates are low. 30-year mortgage rates are near the lowest they've been in 56 weeks and, since the start of the year, rates for all loan types have been on decline.

Mortgage rates for FHA loans, VA loans and USDA loans are down approximately to one-half percentage point. Rates for conventional loans are down close to three-eighths of a percentage point.

Consumers don't expect low rates to last.

Among the questions in the June Fannie Mae Housing Survey is: "Do you expect mortgage rates to go up, go down, or stay the same in the next 12 months?" Just 4% of those surveyed said mortgage rates will drop.

4 percent is equal to 40 consumers out of 1,000 surveyed by Fannie Mae -- a tiny, tiny number. Yet, history may prove these 40 consumers correct. It appears to be common knowledge that "current mortgage rates can't stay this low forever". Yet, rates have dropped steadily for the past 5 years.

In 2009, current mortgage rates were at 6 percent. Everyone knew it was the lowest that mortgage rates would get.

In 2010, current mortgage rates were at 5 percent. Everyone knew it was the lowest that mortgage rates would get.

In 2012, current mortgage rates were at 4 percent. Everyone knew it was the lowest that mortgage rates would get.

And now, in 2014, mortgage rates are falling again. Consumers now lock rates in the 3s and home affordability is increasing. Yet consumers, again, expect for mortgage rates to rise.

Expectations for rising mortgage rates may be one reason why 70% of respondents said "now is a good time to buy a home". Rising mortgage rates affects how much home you can afford.

Every 1 percentage point increase to mortgage rates lowers your maximum purchase price by 11%. This can mean the difference between buying a 4-bedroom home or three-bedroom home; between a 3-bathroom home or a two-bathroom one; between living in a top-rated school district or a second-tier one.

When mortgage rates rise, it will cost more to own a home. Thankfully, buyers have access to a multitude of low- and no-downpayment mortgage loans including the 100% USDA mortgage, the no-money-down VA loan, and the 3.5%-down FHA loan.

In addition, via the FHA Homeowners Armed With Knowledge (HAWK) program, first-time home buyers can get access to reduced FHA MIP. 

Get Rates. See How Much You Can Afford.

For today's home buyers, the improving economy is moving home prices higher and holding mortgage rates down -- an unexpected and welcome development. Purchasing power is extending even as home values climb.

Plan for your upcoming purchase. Get today's mortgage rates and find out how much home you can afford. Rates are available for free online with no social security number required to get started and no obligation to proceed.

Click for today's mortgage rate quotes.

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

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2014 Conforming & FHA Loan Limits

Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.